DS Investment & Securities analyzed on the 8th that Sebang Battery is expected to achieve earnings growth through AGM (Absorbent Glass Mat). They newly issued a 'Buy' investment rating and a target price of 100,000 KRW.
AGM is an essential battery for the vehicle's Idle Stop & Go system (a system that automatically stops the engine when the car stops) and is installed in hybrid and electric vehicles. Kim Suhyun, a researcher at DS Investment & Securities, explained, "The selling price of AGM is about twice that of conventional internal combustion engine vehicle batteries, and the profit margin is estimated to be about 1.5 times higher. The proportion of AGM in automotive batteries is rapidly increasing, and as of last year, it is expected to account for about 350 billion KRW, or 21% of sales."
He added, "With a capacity expansion of 1 million units this year and strengthened sales capabilities to respond to increasing AGM demand overseas, the ratio of original equipment (OE) to aftermarket (AS) is expected to shift to 4:6 by 2026. Since the profit margin of AS compared to OE is overwhelmingly higher, profitability is expected to improve significantly in the future."
DS Investment & Securities forecasted that Sebang Battery's sales and operating profit this year will increase by 12.7% and 29% year-on-year to 1.9 trillion KRW and 170 billion KRW, respectively. He explained, "The causes of sales growth include the expansion of AGM sales, increased sales from overseas subsidiaries, and revenue generation related to battery modules from subsidiaries. As the proportion of AS sales within AGM increases and profitability-centered operations become possible due to stabilized raw material prices, operating profit and margin are expected to improve significantly."
He added, "With a price-to-earnings ratio (PER) of 6 times, return on equity (ROE) of 10%, and price-to-book ratio (PBR) of 0.6 times, the investment attractiveness is considered high."
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